Why MTN Will Rebound after N330 Billion Fine

Kunle Aderinokun

With a reduced fine of N330 billion and a payment plan staggered over a period of three years, it will not be long before telecoms giant, MTN Nigeria, rebounds.

Reprieve came the way of MTN on Friday when the Nigeria Communications Commission (NCC) slashed its fine to N330 billion (less than $1 billion) from initial N1.04 trillion (which was $5.2 billion at the time the fine was imposed).

The reprieve came after eight months of engaging with the regulator over the fine imposed on the telecoms giant for failing to deactivate 5.2 million unregistered and improperly registered SIM cards on its network.

In the wake of the fine imposition and as a consequence of their action or inaction, three top executive officers of MTN were forced to resign, namely Sifiso Dabengwa , the Group CEO; Mike Ikpoki, CEO of MTN Nigeria; and Akinwale Goodluck, Director, Regulatory and Corporate Affairs. The company’s shares also plunged by 5 per cent when the news of the imposition of the fine broke last year, before gradually picking up when the telecoms firm began to engage Nigerian authorities on way out.

With the adjustment of the fine to N330 billion, at a time of looming devaluation of Naira and the prevailing exchange rate of the Nigerian currency, MTN will be paying less than 20 per cent of the initial value of the fine under terms of agreement which also discounted the initial N50billion earlier paid by MTN to the government.

The flexible payment plan also gives MTN enough breathing space, as it provides that the balance of N280 billion would be made in six tranches within a period of three years.

By the terms of agreement, MTN will pay N30 billion into NCC’s Treasury Single Account (TSA) with the Central Bank of Nigeria (CBN), 30 days from the date of the agreement dated June 10, 2016.

Other dates of payments include: March 31, 2017, (N30 billion); March 31, 2018, (N55 billion); December 31, 2018, (N55 billion); March 31, 2019, (N55 billion) and the balance will be on May 31, 2019, (N55 billion.)

With a profit of about N200 billion in 2015, in one and a half years, it is possible for the telco to settle the fine from its profit without significant adverse effects on its balance sheet.

A cursory look at the financial statement of MTN Nigeria, showed that in 2015, the company recorded a profit after tax of N190 billion ($955 million) as at 31 December 2015.

Only last Friday, following the news of reduction in the humongous fine, the Group’s share climbed 13.18 per cent at the Johannesburg Stock Exchange, South Africa, gaining 16.30 rands to close at 140 rands, which is the biggest gain since 2008.

Besides the company’s high profitability profile, industry analysts note that MTN Nigeria has the prospect of even growing bigger following its new business frontiers with the 2.6 GHz licence it got from NCC to stream TV contents. The MTN TV service, a digital pay TV, which pilot launch has already been done is expected to converge telecommunications, broadcasting and media.

Analysts are of the opinion that with the new business model, it could recoup monies lost to fines within the shortest time possible.

Other aspects of the agreement include that MTN Nigeria would be listed on the Nigeria Stock Exchange (NSE) as soon as it is commercially and legally possible, and the tendering of an apology in line with the apology previously tendered in correspondences relating to the matter to the government of Nigeria and Nigerians within the one month of the execution of the agreement.

However, the House of Representatives Committee on Communications has faulted the reduction of the fine and summoned the regulatory authority and the Attorney General of the Federation to appear before it tomorrow.

But the view among industry analysts is that the telecoms giant, in no time would put the issue of the fine behind it.